B.C. needs to catch up in restoring old gas wells, auditor says

The shale gas boom in northeastern B.C. has left a backlog of thousands of inactive wells that need to be filled in and have their sites restored, B.C. Auditor General Carol Bellringer says in a new report.

Legislation was passed last year to require gas drillers to decommission wells, but the rules lacked a “trigger” to determine when that should happen, the audit concluded. By 2018, that left a backlog of more than 7,000 well sites that were inactive but not sealed with concrete and cleaned up.

Bellringer also found that security deposits from drilling companies did not cover growing restoration costs as horizontal hydraulic fracturing led to rapid growth in gas development.

“Decommissioning and restoration are the operator’s responsibility, but in cases where sites are ‘orphaned’ by bankrupt or absent operators, the B.C. Oil and Gas Commission becomes responsible for the work,” Bellringer wrote. “The number of orphan sites in B.C. increased from 45 in 2015-16 to 326 in 2018-19.”

Security deposits from drilling companies are put into an “orphan fund” to cover costs, but in 2016-17 the fund was short $16.6 million and the following year it was short $13.1 million.

In its response to the audit, the B.C. Oil and Gas Commission said it is developing a new “comprehensive liability management plan” based on changes to B.C. legislation passed in May 2018. The plan “holds industry accountable, addresses unrestored oil and gas sites and protects the environment and public safety,” the commission says in its response to the audit.

“These new tools will address he restoration of orphan sites in a timely manner, while ensuring no direct costs to taxpayers.”

The commission has implemented a policy to restore orphan wells within 10 years of designation, and has agreed with all 11 recommendations in the audit. They include allocating $14 million for the orphan fund for the current year.